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What you should do in 2012: Start a company

Forget predictions for the new year--here's an edict: go start a company.

It's the first day of 2012 and my 1,000th post on CNET and I'd like to encourage my dear readers to go out and raise their entrepreneurial flags.

Let's assume you have an idea and the desire to turn it into a commercial endeavor. Much is made of financings and investors but that all pales in relation to the fact that starting a company is hard. Keeping one going is even harder.

This should come as no surprise and yet a lot people still seem to believe the gushing reports of how easy it is to raise money (and eventually run out of money) for your blog-wiki-social game for hamsters, and many don't quite realize just how difficult it is to get a company off the ground--not just an idea, but something that will eventually make money.

For my taste there is too much interest in angels, super-duper-angels and term sheets and not enough concern about how to make a great product that people want to pay for in perpetuity.

Partially, the focus on non-product aspects of company building is because it's hard to know what to do and partially it's because to get practical advice you need to become part of a network of founders and/or VCs that can help you get your focus right. (Note: I'll leave the emotional roller-coaster aspect for another post, but trust me when I tell you to find an outlet for your stress--pushups are a great choice when you are pressed for time.)

Ideas are like currency in Silicon Valley and VCs trade in them all day long. The real trick is executing against a plan and constantly ensuring that you are on the right track.

When people ask how to raise venture money, I point out a few factors that can help (in no particular order):

  • Have a lot of venture capital relationships--VCs are in many ways professional interviewers and your personality may not match them or their portfolio, so it doesn't hurt to know a lot of people.
  • Have raised money before--This obviously doesn't apply for everyone, but showing that you can raise money and run a company--even in a technical role is hugely helpful.
  • Have experience that suggests you are fundable--It used to be if you worked at Sun you could get venture funding, now it's Google, Facebook and Twitter. But, it really shouldn't matter as long as you have a hypothesis and proof points that show you can be successful.
  • Have a team ready to go to start building a product once funded--Hiring is the single most difficult and most important thing you will do as an entrepreneur. If you have a group (as co-founders or in queue) to join your team you've already mitigated one concern--that you can put a team together. For future hires you should be able to take advantage of the network effects of your core team to hire more people.
  • Have a product ready to go to market once you have funding--In many cases having an already marketable and/or sellable product is what drives the financing. Believe it or not, it can also be a negative if investors think you've marketed poorly or haven't grown fast enough or don't have a compelling offering. (I know, I know, nothing ever makes sense in fundraising.)

Of the list above, having a team, ideally one that has worked together in the past is going to be a critical decision-making factor in raising venture money and should in theory also help to make you more successful as you don't have to learn a whole bunch of personal and work styles.

There are so many angles and aspects to talk about in regards to fundraising and entrepreneurship that the discussion can and will go on forever. The only way to really know is to go out and do it yourself.

Best of luck in 2012!

NOTE: I started this blog on Halloween 2007, so it's taken just a bit more than four years to get to 1,000 posts. I was far more prolific in the old days, but I also used to have more hair and far more anger.